This week has been one of progression for official economic statistics. We started with poor public finance numbers which were then followed by better than expected inflation numbers with the annual rate for the Retail Prices Index or RPI actually falling albeit only by 0.1%. Then this morning we have an outright better number.
Retail sales volumes are estimated to have risen by 0.5% in September 2025, following an increase of 0.6% in August 2025 (revised up from a 0.5% rise in our previous bulletin).
So as you can see a positive number accompanied by a positive revision. Along the way it has not been a good week for economists expectations although it is nice swerve from the Financial Times to put the blame on Reuters.
The rise in sales volumes from the previous month reported by the Office for National Statistics on Friday was far better than the 0.2 per cent decline predicted by economists surveyed by Reuters.
If we step back we see that they will be a positive influence on the third quarter GDP numbers as 5% of it has grown.
The quantity of goods bought (volume) in retail sales is estimated to have risen by 0.9% in Quarter 3 (July to Sept) 2025 when compared with Quarter 2 (Apr to June) 2025.
Over the quarter it has been driven by these factors.
Good weather in July and August helped clothing sales in Quarter 3, while non-store retailers showed sustained monthly rises over both quarters.
The performance of the clothing sector presumably gave them the confidence to impose the price rises we saw in the September inflation figures on Wednesday.
If we look for an annual comparison then the quarterly and annual numbers are below.
When compared with Quarter 3 2024, sales volumes rose by 1.0%…..and rose by 1.5% over the year to September 2025.
What happened in September?
The detail starts in rather upbeat fashion.
Total sales volumes rose over the month to September 2025, marking the fourth consecutive monthly rise and bringing volumes to their highest level since July 2022.
But the detail then rather peters out.
Non-food stores (the total of department, clothing, household, and other non-food stores) rose by 0.9%. Among other non-food stores, computer and telecommunications retailers grew strongly.
It is another sign of the problems at the Office for National Statistics which I will return to. But there was a little hope for the high street there although I note that one area of strength was pure Gold for online.
Sales volumes for non-store retail also rose in September 2025, hitting their highest level since February 2022. A notable contributor to this rise was online jewellers reporting a strong demand for gold.
Well done to anyone who bought as you have to be in profit although with the decline in the latter part of the week below US $4100 I have just checked my chart to make sure!
Office for National Statistics
For those unaware it is under new management after its past problems of which the headline act was the collapse in response rates to the Labour Force Survey. But sadly past problems remain and let me illustrate this via a blog produced by Liz McKeown telling us that monthly GDP is a core piece of their output and
The monthly data itself also continues to provide timely insights not readily available in the quarterly data.
As it’s pattern is misleading more often than not they are confusing noise with signal. Also you may note the lack of monthly detail on the Retail Sales numbers above which heads in the opposite direction.
Plus along the way I have spotted this on online sales.
With the monthly series, sales values rose by 1.4% over the month to September 2025, and by 5.6% when comparing September 2025 with September 2024.
Why is it values and not volumes? For those unaware it means that no inflation adjustment has been made here. In fact the whole online section makes no mention of volumes. If you cannot produce volumes for this then monthly GDP is in rather a hole
Along the way I checked the inflation measure used here or deflator. The one for food or predominantly food stores as they call it rose by 3.7% over the past year. I realise my own shopping basket is no doubt biased but I cannot connect the two.
Market PMI Business Survey
There was a more upbeat release here as well today.
“October’s flash UK PMI survey brings hope that September was a low point for the economy from which business conditions are starting to improve. Output has picked up, with a particularly welcome return to growth for manufacturing for the first time in over a year accompanied by an upturn in demand for services, notably among consumers. Business confidence has also brightened slightly, job losses have moderated, and inflationary pressures are coming back to levels consistent with the Bank of England’s 2% target.”
As you can see that was heading in the direction of Goldilocks porridge being just right with a stronger economy accompanied by weaker inflationary pressure. However a fair bit of the improvement was the resumption of production at Jaguar Land Rover.
“However, even with a helping hand from restarted production at JLR, the overall pace of growth signalled by the PMI remains consistent with only sluggish GDP growth of around 0.1%. “
Whilst the JLR news is welcome it also reminds us of how apparently vulnerable we are to online disruption and cyber attack. Plus although a rise in monthly terms it is still less than what the Bank of England has predicted.
Incorporating the bounce-back in trade volumes, Bank staff expected headline GDP to increase by around 0.4% in 2025 Q3, slightly stronger than the underlying trend in growth.
The fault line appears to be in exports with S&P Global reporting this.
Goods exports also continue to fall at a worryingly steep rate, in part due to the global trade disruptions caused by US tariff policy.
The UK Gilt or Bond Market
The Times political editor Patrick Maguire has offered his view,
Have you heard the one about Rachel Reeves and the bond traders? You probably think you have. The Westminster consensus on the chancellor’s credibility goes like this: the markets trust her about as much as they would Juan Perón, Brian Cowen, or, on a good day, Liz Truss. And sure, it’s believable. But right now, although her forthcoming budget is one of the many intractable problems facing this Labour government, her standing in the markets isn’t one of them.
Once I had checked that this was an article rather than an advert it occurred to me that as I read it there was no mention of what was the X factor this week which was the inflation release on Wednesday. Although he does seem to realise that Wednesday existed.
But on Wednesday we learnt that the cost of borrowing is now at its lowest level in a year.
This made me wonder as to who wrote this?
Yes, the chancellor knows
Plus
As far as the chancellor is concerned, that something is what she’s been doing all along. Consistency might seem an unlikely compliment to pay her:
Indeed it is
Her October 24 Budget raised inflation and the cost of living.
Reeves is conscious that the cost of living remains “the number one issue” and has pushed cabinet ministers for policy proposals to bring it down.
Thank God we have Rachel Reeves!
The economic problem is that the bond market currently finds the very thought of that nauseating. We know which path Reeves has chosen. It’s going to be a lonely walk.
Comment
There has been some better news on the UK economy this week with more signs of economic growth and a lower inflation trajectory. The catch is that the surge in public spending is behind the growth.
Central government’s current expenditure was provisionally estimated at £557.2 billion in the FY to September 2025, £47.3 billion (or 9.3%) more than in the same six-month period a year ago.
But it is true that a combination of better worldwide trends with the US ten-year yield falling to 4% and for much of this week below it combined with there not being a 4 big figure to the UK CPI inflation measure have reduced our borrowing costs.Fingers crossed for more of that sort of news.
